Dimon Forecasts Five More Years of Finger-Pointing

James "Jamie" Dimon, chief executive officer of JPMorgan Chase & Co., listens during a panel discussion on the opening day of the World Economic Forum in Davos, Switzerland, on Wednesday, Jan. 23, 2013. Photographer: Chris Ratcliffe/Bloomberg

“It’s going to be another five years of pointing fingers,
scapegoating, using misinformation” and people thinking they
have improved the system, Dimon said during a panel discussion
at the World Economic Forum’s annual meeting in Davos,
Switzerland.

Dimon, 56, has led financial-industry executives in warning
that new rules meant to curtail risk in the wake of the
financial crisis may result in unintended consequences and hurt
the economy. At the forum in 2011, the CEO sparred with France’s
then-President Nicolas Sarkozy over “bad policies” that Dimon
said would impede growth.

“We’re trying to do too much too fast,” Dimon said today.

He and UBS AG Chairman Axel Weber, speaking on the same
panel, criticized global regulators for making capital and
liquidity rules for banks too complicated across different
jurisdictions. Weber, 55, said the lack of worldwide standards
has made bank regulations too “complex.”

Dimon’s stature in the regulatory debate was undermined as
a wayward bet on credit derivatives cost New York-based
JPMorgan, the biggest U.S. bank by assets, more than $6.2
billion in 2012. Last week, the company’s board of directors
faulted Dimon’s oversight of the botched trades and cut his pay
package by 50 percent to $11.5 million.

Leveraged, Opaque

Other panelists including Zhu Min, deputy managing director
of the International Monetary Fund, and Paul Singer, founder of
hedge fund Elliott Management Corp., said the financial sector
and some individual banks are still too big, too leveraged and
too opaque.

“It’s five years after the crisis, we still haven’t fixed
a lot of the things that you’re talking about,” Dimon told Zhu.
Policy makers and executives need to sit down together and
“figure out what we’ve got to fix now,” Dimon said.

Government support, including direct cash infusions and
implied guarantees, was the only thing that “stemmed the
cascading transmission of the financial collapse,” Singer said.
While the sector is less leveraged than it was in 2008, it’s
still not enough for “outsiders to understand the financial
condition of the major financial institutions,” he said.

Fannie, Freddie

Dimon, addressing Singer, said it’s for those “who sit on
the sidelines” to criticize.

The CEO defended banks from blame and said other firms
deserved more scrutiny, including Fannie Mae and Freddie Mac,
the mortgage-finance firms seized by the U.S. government in
2008, and American International Group Inc., the insurer that
received a $182.3 billion taxpayer bailout.

“Everybody thinks it’s that one thing that sunk the
system,” he said. Fannie Mae and Freddie Mac were the “largest
financial catastrophe of all time.”

Zhu, 61, reminded Dimon that the world just experienced the
worst financial crisis since the Great Depression.

‘Zero Deleveraging’

There’s been “zero deleveraging” in the financial sector
since the crisis, he said. “The size is still big, the product
is still complicated. And the market-based activity hasn’t
actually decreased, rather increased.”

While extraordinary measures by central banks kept the
financial crisis from worsening, Dimon said governments now need
to devise policies for growth.

“Most important now is good sustainable growth to make the
central bank job easier,” Dimon said. “It’s incumbent on
governments to do good fiscal policy.”

Singer said that policy makers have been “lulled into
security,” believing that quantitative easing, is “costless.”

The Federal Reserve in September said that it would expand
its asset-purchase program, known as quantitative easing, to
stimulate the economy. European Central Bank President Mario
Draghi pledged in August to buy bonds to prop up some euro-region countries and has loaned more than 1 trillion euros ($1.3
trillion) in three-year loans to banks to bolster credit supply.

Weber said the “short-term fixes” imposed by central
banks will be paid for by future generations.

Central banks’ attempts to counteract the financial and
sovereign-debt crises are “pushing the problem down the road,”
said Weber, a former head of Germany’s Bundesbank. “We are
heading to a very dangerous environment.”